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Why Is Crown Holdings (CCK) Down 2% Since the Last Earnings Report?

More than month has gone by since the last earnings report for Crown Holdings, Inc. (CCK - Free Report) . Shares have lost about 2% in that tme frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Crown Holdings Q3 Earnings In Line, Revenues Beat

Crown Holdings delivered third-quarter 2017 adjusted earnings per share of $1.41, which came in line with the Zacks Consensus Estimate and delivered an improvement of 6% on a year-over-year basis. Earnings came within management’s guidance of $1.35-$1.45.

On a reported basis, earnings came in at $1.32 per share, up 1% from $1.31 in the prior-year quarter.

Net sales in the quarter rose 6% year over year to $2,468 million. Revenues beat the Zacks Consensus Estimate of $2,411 million. This can be attributed to improved global beverage can volumes, food and aerosol can volumes, and the pass through of higher material costs to customers. It was also aided by favorable impact of currency translation.

Cost of products sold flared up6.4% year over year to $1,956 million. On a year-over-year basis, gross profit improved 5% to $512 million, while gross margin contracted 30 basis points (bps) to 20.7% in the quarter.

Selling and administrative expenses remained flat at $90 million. Adjusted segment operating income advanced7% year over year to $359 million in the quarter. Operating margin improved 10 bps to 14.5% from 14.4% in the year-ago quarter.

Segment Performance

Net sales from the Americas Beverage segment were $763 million, up 1.5% from $752 million in the year-ago quarter. Segment operating profit inched up 1% to $131 million from $130 million in the year-ago quarter.

The North-America Food segment’s sales increased 0.5% year over year to $194 million. Operating earnings remained flat year over year at $23 million.

The European Beverage segment’s sales increased 2% year over year to $428 million. Operating income rose 1% year over year to $78 million.

Revenues in the European Food segment were up 3% year over year to $639 million. Segment operating profit went up 2% to $96 million from $94 million in the year-ago quarter.

Revenues in the Asia-Pacific segment remained flat at $300 million. Operating profit also remained flat at $40 million in the reported quarter.

Financial Update

Crown Holdings had cash and cash equivalents of $374 million at the end of the third quarter compared with $526 million recorded at the end of the prior-year quarter. Cash flow from operations was $489 million in the nine-month period ended Sep 30, 2017 compared with $490 million in the prior-year period.

Adjusted free cash flow was $206 million in the nine-month period ended Sep 30, 2017 compared with $154 million in the prior-year period. As of the quarter end, Crown Holdings’ total debt increased to $5.1 billion compared with $5.0 billion as of the prior-year quarter end.

The company repurchased 6.2 million of shares for $339 million so far in fiscal 2017.

Outlook

The company currently expects 2017 adjusted diluted earnings per share to be in the range of $3.98-$4.03. Adjusted diluted earnings per share for the fourth quarter are projected in the range of 75-80 cents.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

At this time, Crown Holdings' stock has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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